Prime industrial rents in Edinburgh grew by +11.1 percent in H1 2015, the largest increase in Europe, according to the latest Industrial and Logistics Snapshot from Colliers International.
The Western Europe markets of Glasgow and Manchester (both +10 percent), Bristol (+8.3 percent) and Rotterdam (+7.9 percent) also performed positively. Conversely, Minsk in Belarus reported the biggest decline in prime rents in Europe in the first half of the year dropping -15.5 percent in H1 2015; this was closely followed by Kiev in the Ukraine with a decline of -14.9 percent and St. Petersburg in Russia with a decline of -8.3 percent.
Tim Davies, Head of EMEA Industrial and Logistics, at Colliers International, said: “The industrial and logistics market in Europe continues to be characterised by constrained availability of high quality warehouse and distribution space. Despite this, prime logistics rents remained stable in the vast majority of markets in the first half of 2015. The supply of quality product remains limited in the UK, and this fact combined with increased demand, has led to a rise in rents across all locations for prime stock in H1 2015.”
“The UK continues to lead the way in terms of increased activity, but the rest of Europe is beginning to follow suit,” Davies continued. “All UK markets report increasing rental levels which reflects the fact that levels of supply are being eroded and occupational demand is increasing. Inevitably with funding more readily available speculative development will occur throughout the regions’ strongest locations.”
The availability of good quality space remains very low in all major logistics markets in Germany and the development pipeline is still constrained. Despite this, prime rents remained stable in H1 2015, with exception of Munich where slight growth was recorded (+2.3 percent) and a further upward trend is expected.
The logistics market in Holland is also seeing lack of modern supply in key locations. In this situation, many occupiers choose to build their own premises. However, thanks to an improved economic outlook and higher availability of financing, an increasing number of developers have decided to build speculatively. The other notable trend is the increasing demand for smaller premises around large cities, in particular from the e-commerce sector.
In Sweden, prime rental increase were recorded in Gothenburg (+4.3 percent) and Malmoe (+3.8 percent). After strong growth in 2014, prime rents in Stockholm flattened in the first months of 2015.
In Southern Europe, the logistics rents in Madrid’s prime areas started a slight recovery trend (+4.2 percent). The supply of high quality logistics units is very scarce, leaving many occupiers’ requirements impossible to meet.
Prime rents across major Central and Eastern European markets remained largely stable. Some growth was recorded in Budapest (+6.5 percent) on the back of improving demand and falling vacancy levels.
The total investment volume for the industrial and logistics properties in the first half of 2015 reached €10 billion in the EMEA region, representing a 9 per cent year on year increase.
Strong yield compression took place in all UK markets, with the sharpest falls (-100 bps) recorded in Manchester, Bristol, Edinburgh and Belfast.
Key German markets, with the exception of Berlin and Hamburg, also saw further yield compression, as did the main Dutch logistics locations.
In Scandinavia, which recorded an 85 per cent annual increase in the industrial investment volumes, the main Swedish logistics markets of Stockholm and Gothenburg recorded a slight compression (-25 bps), as did Oslo, the Norwegian capital (-10 bps).
Tim Davies concluded: “Investors’ appetite and record-low interest rates continued to drive compression of prime logistics yields. In the first six months of 2015 we saw prime yields tightening in more than half of the markets we monitored. In the next 12 months, further tightening of yields is expected across the Netherlands and UK, as well as in Dublin, Central Poland, Warsaw and Bucharest.”